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Reader Julia at Grow. Cook. Eat. asks me an exceptional question:
I'm curious to know how you would prefer to see companies raise their prices. Inflation is inevitable. As the cost of inputs goes up (not just the cocoa, but also fuel for transportation, etc), so does the cost of production. We can't expect food-companies to keep prices the same indefinitely (or can we?).
This is a fascinating question, although I'd like to first take minor issue with Julia's premise: In my view, price inflation isn't always inevitable. It's common, granted. But pricing trends have been anything but consistent over the past decades across many products and services. And hidden in this wide range of pricing trends is a key to becoming a more empowered consumer.
Again, granted, some prices only seem to go up. The price of most meats and almost all branded cookies, crackers, soda, etc., rise consistently--as do many personal services, like haircuts and restaurant meals. At the same time, however, prices of many other foods have stayed surprisingly stable. Quite a few products, like dried lentils, canned and dried beans, potatoes, carrots, cabbage and other foods can often be purchased at prices not much higher than what I paid when I first moved out on my own some twenty years ago.
Further, some areas of the grocery store, thanks to new competition, are facing falling prices: for example, I can now buy most of my spices at lower prices than I paid just a few years ago, thanks to increased competition from some new spice suppliers now on grocery store shelves. (Long time readers will know exactly why this warms my heart.)
Finally, there are some segments of the consumer products world where prices go through secular declines: consumer electronics, computers, cellphones and cellphone service all cost a fraction (and in some cases a tiny fraction) of what they cost a decade or two decades ago. Even our cable bills, long a bastion of steady annual price increases, are starting to sag in the face of other, less expensive ways to watch TV. (If you haven't called your cable company recently and asked for a price concession, please do so. Right now. I'll wait.)
Okay. Eons ago, when I was getting paid to pick stocks on Wall Street, we had an expression for companies that tried to put through price increases. We'd ask, "So, is their price hike going to stick?" In other words, would their customers accept the price hike? More importantly, did their customers have other suppliers or substitutes that they could turn to if they wanted to resist the price hike? These were the key factors that drove whether a price hike would "stick"--or if the company had to cave in and roll that price hike back.
And this, I firmly believe, is the key to empowering consumers when we face price hikes.
I'll even go further, and argue that we consumers have simply conditioned ourselves to accept regular price increases with certain products. Among the worst offenders: branded, heavily-advertised products and second-order foods. Yes, we notice them (usually), grumble a bit to ourselves, and maybe even mentally shake our fists at Big Food. But then we willingly take these products to the checkout line and buy them anyway.
Maybe, just maybe, we should entirely rethink these purchases. What if we quit buying them--or drastically cut back--and made the makers of those products cave in and roll back their prices? We are already beginning to see this happening across some branded food categories, as consumers are rising up, adjusting their purchasing habits, and finding substitutes for branded products that are priced above their real value. As a result, companies like Unilever and Proctor & Gamble, after years of subjecting us to steady, consistent price hikes, are finding a the rules are changing. They've had to step up discounting and cut prices in order to maintain sales. In other words, consumers are pushing back--and these companies are caving.
So with that as a backdrop: here's how I'd like my price hikes: I'd like them to be clear, not hidden. Overt, not stealthy. In other words, pretty much the exact opposite of what Hershey's and Davis Baking Powder did.
Look: if you're going to raise prices, don't hide it. Just admit it and own up to it. If your product is worth the extra value, I will still pay for it. And if you try to sneak a stealth price hike past me, I will drop your product like a bad habit.
Readers, what's your view? How do you like your prices raised?
The Do-Nothing Brand
Divorce Yourself from the False Reality of Your Grocery Store
Ten Thoughts On the True Value of Brands
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